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Tuesday, March 19, 2013

Gold and Silver charts: an update

Gold Chart Pattern

Two weeks back, the 6 months daily bar chart pattern of gold was in a bear market and in danger of falling further to test its previous low of 1525. Instead, gold’s price consolidated sideways between 1560 and 1600 for a few days. Finally, the resistance from its 20 day EMA and the 1600 level was overcome on a volume surge.

What caused the sharp change in sentiment? Probably due to fears that the conditions proposed for the bailout package to solve the bankruptcy problem of the small island nation of Cyprus may turn into a contagion in the rest of Europe.

Daily technical indicators are beginning to turn bullish. MACD has crossed above its signal line, and both lines are rising in negative territory. RSI has climbed to its 50% level and looks ready to move higher. Slow stochastic has crossed above its 50% level.

Gold’s price may try to move above its 50 day EMA towards the 200 day EMA. Bears are likely to use the opportunity to sell.

Silver Chart Pattern

Two weeks back, positive divergences in daily technical indicators had led to the following comment: “An upward bounce towards the falling 20 day EMA is likely. Bears may use the bounce to sell.”

The 6 months bar chart pattern of silver has been consolidating sideways for the past month. Note that an attempt to move up was thwarted by the falling 20 day EMA.

Daily technical indicators are giving mixed signals – which is often the case during sideways consolidations. MACD has crossed above its signal line, but both lines are in negative zone. RSI is moving sideways below its 50% level. Slow stochastic rose above its 50% level, but is turning down.

Expect some more consolidation before silver’s price can break out of its narrow range between 28.25 and 29.50.